When EBIT Is Positive, High Leverage Decreases the Returns to Shareholders

question 369

True/False

When EBIT is positive, high leverage decreases the returns to shareholders (as measured by ROE).

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Definitions:

Double-Declining-Balance

An accelerated method of depreciation that doubles the straight-line depreciation rate.

Resale Value

The estimated value at which an asset or property can be sold in the future, taking into account depreciation or appreciation.

Equipment

Equipment refers to the necessary items for a particular purpose, especially tools or devices needed for a specific task or activity.

Sum-Of-The-Years-Digits

A depreciation method that results in a more accelerated write-off of an asset than the straight-line method, basing calculations on the sum of the years of the asset’s life.